The songwriter and producer, who's credited on such global smashes as Kelly Clarkson's "Since U Been Gone" and "My Life Would Suck Without You," Pink's "Who Knew" and Katy Perry's "I Kissed a Girl," among others, was among the last candidates standing after a months-long search for a third judge to join returning panel members Keith Urban and Jennifer Lopez (the latter has not officially been announced).

However, as THR wrote on Aug. 24, Luke, whose real name is Lukasz Gottwald, was bound to run into a snag with Sony Music. The music giant signed Luke to a lucrative label deal in 2011 (his Kemosabe imprint is home to songwriter-turned-solo artist Bonnie Mckee, rapper Juicy J and pop-urban act Becky G, who herself said at last night's MTV Video Music Awards, "I think [Idol] is going to happen" for Luke, but Sony's competitor, Universal Music Group, holds the exclusive rights to American Idol recordings.

Allowing Luke to spend months of the year judging and nurturing talent then developing said artists for another label makes little business sense for the company that invested so deeply in his own hit-making power. L.A. Reid faced a similar obstacle when he was in the running for the Idol gig prior to season 10. It was, in fact, what helped lead the veteran executive to Fox's other singing competition, X Factor, which has a recording partnership with Sony. Reid left after two years on the show.

For Luke's part, says an insider close to the situation, the hit-maker came to the realization that the commitment would simply demand too much of his time. "He really loves his artists and wants to build up the label," a source tells THR, adding that Kemosabe is "on the cusp" of breaking Becky G, a top priority for the imprint and the company overall. Beyond the label's current projects, "Luke wants to build an entertainment company ... after a lot of conversations, both Luke and Sony Music CEO Doug Morris came to the mutual agreement that taking Dr. Luke out of the Idol running "was the best thing for all parties."

Who's left on the short list? Among the contenders is Justin Bieber manager Scooter Braun, an eleventh-hour suggestion by Lopez. The charismatic ex-party promoter and marketing whiz is seemingly open to the idea and has his own label deal with UMG, putting him on the right side of the Idol loyalty fence. But with a roster than includes newcomer Ariana Grande, K-Pop sensation Psy and boy band The Wanted, Braun, like Luke (who owns a publishing company in addition to his hands-on work in the studio), is spread thin.

Idol is soon to enter its 2014 season in earnest. In years past, auditions would start in September.